Is my contract good enough? Was repossession legal?

[Elemenop]

What is the name of your state (only U.S. law)? CA

Our company installed exterior property improvements at a retail shopping center. In our contract with the property owner we requested a 50% deposit with the balance due upon completion. We also stated that the property remains our property until the job is paid in full. The client signed this contract. Nine months later of run around regarding final payment, they never paid and my manager decided to repossess the property. The client filed a police report and the officer stated that it was a civil matter. We would like to sue them in small claims court (approx cost is $4000) but I need to know if we were in the wrong as I did not authorize the removal due to my lack of knowledge in this are of the law. We are not a general contractor, but we are a licensed specialty contractor. My instinct says to re-install the property and take them to court. Can they sue us for anything?

Thank You

 

[tranquility]

I'd try to make them happy. Where did you get the clever contract theory of "property is yours" to skirt the well-established lien system? My goodness. "Re-install and take them to court"? Court is the place you want to avoid. Make nice with the property owner. Work out a deal.

Info edit:
You could have had an argument....before 1971. See:
Cornell v. Sennes 18 Cal.App.3d 126 (1971)

 

[Elemenop]

I'd try to make them happy. Where did you get the clever contract theory of "property is yours" to skirt the well-established lien system? My goodness. "Re-install and take them to court"? Court is the place you want to avoid. Make nice with the property owner. Work out a deal.

A lien must be filed within 90 days from completion of work and it's been 9 months. As I said, I did not authorize this, it was a rogue employee. Does the naive "property is ours" statement help in any way as to who own the property? Did we break the law?

 

[tranquility]

It's called conversion. Look up the case, it will explain it all. Cut and paste the following into google:

"18 Cal.App.3d 126"

(Use the quotes.)

 

[Elemenop]

It's called conversion. Look up the case, it will explain it all. Cut and paste the following into google:

"18 Cal.App.3d 126"

(Use the quotes.)

I reviewed that case, but in our instance the property owner/landlord IS our client and they placed the order for improvements to their own property.

Did we break the law?

 

[tranquility]

Good point, well distinguished. I just glanced at the case before posting, I'll see if there is anything else out there that helps in resolving the issue.

As to the breaking of the law, to repossess something requires some steps in the contract. Just because it is yours does not mean you can trespass on his property to take it back.

 

[Elemenop]

Good point, well distinguished. I just glanced at the case before posting, I'll see if there is anything else out there that helps in resolving the issue.

As to the breaking of the law, to repossess something requires some steps in the contract. Just because it is yours does not mean you can trespass on his property to take it back.

I appreciate the help. I found Adams v. Egly which stated self-help repossession (in CA) was not lawful since due process was denied. I just can't determine if our measly "Property is ours until paid in full" overrides this. I don't have enough hubris to think that it does, I am just crossing my fingers.

By the way, I already have the employee out in the field re-installing the items.

 

[Elemenop]

Hmm, Article 9 in the UCC, might be in my favor? http://law.scu.edu/FacWebPage/Neustadter/sdbook/main/commentary/63.html
Everything I read feels so ambiguous since I don't have a background in law.

 

[tranquility]

Yes, 9-609 might be applicable. (Enrolled as Civil code 9609. http://law.onecle.com/california/commercial/9609.html ) But, I don't think you want to go to the security path because of the fixture aspect. You would not have pure self-help then. You would have to go to the repossession statutes and may need court assistance if the document purporting to "secure" the property is not properly worded. But, let is sit a day and let those here think about it. (You too.) Heck, you may be in breach of contract yourself. Think about it. You have 50% of the money to be paid and the property that was affixed while the other side has bupkis. You lost your mechanic's lien rights to the labor from not filing. It is entirely realistic that you now owe the other party the money you received or other damages from the breach.

 

[latigo]

I'd try to make them happy. Where did you get the clever contract theory of "property is yours" to skirt the well-established lien system? My goodness. "Re-install and take them to court"? Court is the place you want to avoid. Make nice with the property owner. Work out a deal.

Info edit:
You could have had an argument....before 1971. See:
Cornell v. Sennes 18 Cal.App.3d 126 (1971)

The OP was not trying to skirt anything nor being particular clever. He writes that the contract specifically provided that title to the materials furnished was retained, to-wit: “remains our property until the job is paid in full”. Obviously a commonly employed conditional sales contract.

The same commonly employed conditional sales contract that was recognized as being enforceable in your cited California case of Cornell v. Sennes.

Quoting from that decision at page 134 paragraph [5b]:

“Here, under the conditional sales contract between plaintiff and the tenant, the equipment remained personalty, subject to removal and repossession on default. But as we have pointed out, it is not legally inconsistent for the same equipment to be considered as a fixture as to the owner who is not a party to the contract and who has no knowledge of the terms thereof.”

In Cornell the property owner was not in privy to the contract and the lessee that ordered the improvements had since abandoned.

Moreover, unlike here, in Cornell the contractor had preserved its mechanic’s lien rights. A factor that may have very well influenced the court to draw its illogical distinction as to the rights of a conditional vendor to reclaim its property.

 

[tranquility]

Moreover, unlike here, in Cornell the contractor had preserved its mechanic’s lien rights. A factor that may have very well influenced the court to draw its illogical distinction as to the rights of a conditional vendor to reclaim its property.

Under that reading of the law, isn't the converse true as well? In that the OP *could not* get a mechanics lien on the property as it never was afixed?

Theory edit:
Now, as to the purported "repossession", what result?

See the Civil Code at sections 1812.2-1812.5. It appears the OP has a choice to:

1812.2. In the event of any default by the buyer in the performance
of his obligations under a contract or installment account, the
holder, pursuant to any rights granted therein, may proceed to
recover judgment for the balance due without retaking the goods, or
he may retake the goods and proceed as hereinafter provided. If he
retakes the goods, he shall, within 10 days, give notice to the buyer
of his intention to sell the goods at public sale or give notice to
the buyer of his intention to retain the goods in satisfaction of the
balance due....

and:

1812.4. The proceeds of a resale shall be applied (1) to the
payment of the expenses thereof, (2) to the payment of any expenses
of retaking, including reasonable attorney's fees actually incurred,
and of any expenses of keeping, storing, repairing, reconditioning or
preparing the goods for sale to which the holder may be entitled,
(3) to the satisfaction of the balance due under the contract. Any
sum remaining after the satisfaction of such claims shall be paid to
the buyer.



1812.5. If the proceeds of the sale are not sufficient to cover
items (1), (2) and (3) of Section 1812.4, the holder may not recover
the deficiency from the buyer or from anyone who has succeeded to the
obligations of the buyer.

I'm not sure that was the remedy the OP seeks.

 

[Elemenop]

Thanks for all your input gentlemen. Where I stand now is, I ordered the employee to re-install the items (easily removable with two screws). I still have the open balance and I would like to get paid for the work done (they have another past due invoice for labor that was placed a day after the first order). If I take them to small claims for the balance after having this history of an employee removing and reinstalling the items, am I going to get into trouble from the court? I know better than to bring emotion into this, but the client (which is incorporated) are a bunch of jerks [<-to use a technical term] who probably never planned on paying the balance to begin with. After doing the work for them, we found out that one of our past due accounts on the books from the month prior was also them, but under another entity name. I would like for them to be held accountable, although I know that is a naive notion these days.

 

[tranquility]

I don't think you're making things less complicated. There are so many facts and intersecting laws here that I have no idea of the outcome other than wishing the action(s) was not taken in the first place. Perhaps latigo will come back with his idea of the best course as I'm not seeing the best way out right now. It might be time for an attorney consult, both for this specific instance and for the effect of the wording you used in the contract. Both in your ability to take the property back and in your ability to get a mechanics lien. While I don't believe it to be true, a strict reading may make both of the remedies incompatible.